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5 cloud computing trends that will be big in 2013

Bernard Golden | Dec. 20, 2012
Will 2013 finally be the year executives stop worrying about cloud security and actually start looking at their bills from cloud service providers? Columnist Bernard Golden thinks so. He has four other cloud computing predictions for 2013, too.

Next year will bring the recognition that developers have embraced public cloud computing because of its speed and agility. Enterprise IT groups will then comprehend that internal offerings have to meet the much higher expectations of developers-expectations raised by what they now recognize is possible. Internal IT groups will confront the reality that warmed-over virtualization isn't nearly enough-and getting to public levels of agility will require process streamlining and end-to-end automation. In a word, it will mean re-engineering, which is much more difficult than buying a new product with the expectation that it will magically make one's private cloud as attractive as the public alternatives.

Expect to see many, many articles next year on the organizational change necessary to successfully implement private cloud computing. If you're implementing a private cloud and haven't thought through how you're going to integrate end-to-end automation and remove process roadblock, you have a problem. A big problem.

3. The Public CSP Business Will See a Pricing Bloodbath

The recent tit-for-tat storage price battle between Google and Amazon, key to the first AWS Re: Invent conference, is just a warm up for 2013. Next year will see ferocious price competition as CSPs attempt to blunt Amazon's growth. Even those that have heretofore eschewed price competition will have no choice but to jump into the fray.

For example, Hewlett-Packard, which not that long ago said "the notion of just standing up a VM for raw compute is kind of done" and promoted the importance of a cloud ecosystem, this week launched its OpenStack-based cloud service with a pricing structure that undercuts Rackspace by a third. That's not exactly the mark of a provider focused on value-added services.

We'll see plenty more of these price wars as CSPs recognize platform wars are a market share land grab. The winners turn into monopolies and the losers slink off the field. However, as Warren Buffett so memorably says, "Only when the tide goes out do you discover who's been swimming naked." Translation: pricing wars are going to show who's really prepared to be a volume player in cloud computing.

Next year, cloud providers will come to understand that cloud pricing is a marginal cost-yield management exercise; efficient design, low-cost operation and, crucially, high utilization are fundamental to success. Land grab economics favor CSPs with access to significant capital. Expect those with access to pursue that advantage. It's no accident that Amazon recently sold $3 billion in bonds. It's arming for the battle.

One can expect real dislocations in the CSP industry as players have to rethink their business plans based on lower revenue streams, including some who conclude that being a cloud provider is a never-ending money pit and decide to exit the industry. We've already seen a couple of departures: the high-profile GoDaddy and the lesser-known Harris, which exited after reportedly spending $100 million on a cloud infrastructure.


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